|Posted on March 23, 2014 at 11:15 AM|
A New York investment firm’s purchase of the bankrupt Montreal, Maine and Atlantic Railway has been delayed, as Canadian regulators say they don’t have all the paperwork needed before they can approve the deal.
The sale of the railroad, which was responsible for last summer’s deadly train derailment disaster in Lac-Megantic, Quebec, was expected to close by March 31, according to the asset purchase agreement signed by the buyer, Railroad Acquisition Holdings, an affiliate of New York-based Fortress Investment Group. RAH is doing business as the Central Maine and Quebec Railway, or CMQR.
However, the parties will not meet that deadline because the Canadian Transportation Agency and Transport Canada have yet to approve the transaction, according to Robert Keach, who has overseen MM&A’s operations during its Chapter 11 bankruptcy proceeding. The delay could be for as long as two months, but that depends on the speed of the regulatory process in Canada.
Jacqueline Bannister, a spokeswoman for the Canadian Transportation Agency, an independent, quasi-judicial body that regulates the country’s transportation system, said Canadian regulators are not to blame for the delay.
As of Wednesday, the Canadian agency had not received an application from CMQR for a certificate of fitness, which is required in Canada to operate a railroad, Bannister sai din an email to the Portland Press Herald.
“If and when CMQR submits an application for a certificate of fitness to operate a railway under federal jurisdiction, the agency will review the submission and issue a decision, as it does for all such applications,” she wrote.
Keach is not worried by the delay.
“The delay is considered routine, and, in fact, the contingency for such a delay was built into the asset purchase agreement,” Keach wrote in an email.
Keach said CMQR had advocated for the March 31 deadline because MM&A’s insurance was scheduled to expire that day and there were concerns that MM&A would run out of working capital to keep the railroad running. Keach on Tuesday said those concerns have been addressed.
“All relevant insurance has been extended to June 1, and the current financing is sufficient to cover the anticipated delay. I do not expect any impact on operations from the delay, and we expect prompt action by the regulatory authorities,” Keach wrote.
MM&A filed for bankruptcy on Aug. 7, a month after one of its oil-carrying trains rolled driverless down a slight incline, derailed and exploded in Lac-Megantic, killing 47 people and destroying much of the town’s downtown area.
Railroad Acquisition Holdings won a bankruptcy auction in January to acquire MM&A’s assets. It plans to continue operating the railroad, which connects Montreal with Bangor, Millinocket and Searsport, under the CMQR name.
The U.S. Surface Transportation Board approved the transaction on March 13 and, because of the time constraints, agreed to exempt CMQR from a requirement to provide a 60-day notice to MM&A employees of an impending sale.
John Giles, the railroad executive who led Fortress’ efforts to acquire the MM&A and will become CEO of the new railroad once the sale is complete, did not immediately respond to emails seeking comment.